In October 2002, the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 came into force. They said, among other things, that in July 2006 lots of fixed term employees would become eligible for permanent employment under their existing fixed term contracts.

In this article, a solicitor from Thompsons' Employment Rights Unit in Cardiff, summarises the basic rights of fixed term employees under the regulations, and looks at some of the practical steps they can take to become permanent employees.

 

What is the background to the regulations?

Like a lot of employment law, the origin of the 2002 regulations can be traced back to a European directive, in this case the European Framework Agreement on Fixed Term Work.

The underlying principle was to improve the quality of fixed term work and to prevent employers from abusing successive fixed term contracts.

And it has had an effect. Since October 2002 (the date when the regulations came into force), the number of people on fixed term contracts has fallen by eight per cent. In the preceding period (1994 to 2001), the number of fixed term contracts increased by seven per cent, according to the Labour Force Survey.

 

What do the regulations say?

Basically, the regulations state that fixed term employees cannot be treated less favourably than comparable permanent employees, just because they are on fixed term contracts (unless the treatment can be objectively justified).

In particular, they have the right not to be treated less favourably as far as the terms of their contract are concerned, and must not to be subjected to a "detriment" (or disadvantage) by their employer.

To make a claim, fixed term employees have to compare themselves with someone in their workplace who is a permanent employee. Then they have to prove that they are being treated less favourably than that person - this could include being offered less training, not being made aware of permanent vacancies, restricting their eligibility to pension and other benefits, and so on.

 

How can fixed term workers become permanent employees?

Under regulation eight, an employee on a fixed term contract can become a permanent employee if:

  • the employee is already employed under a fixed term contract which has previously been renewed
  • the employee has been continuously employed under fixed term contracts for four years or more (discounting the time before 10 July 2002)
  • the employer cannot objectively justify renewing (or extending) the last contract.

 

What is objective justification?

Employers can continue to renew fixed term contracts for more than four years provided that they can objectively justify their decision. The DTI guide to the regulations states that the less favourable treatment can be objectively justified if:

  • it is to achieve a legitimate objective, for example a genuine business objective
  • it is necessary to achieve that objective
  • it is an appropriate way to achieve that objective.

These are wide definitions and, in the event of a dispute, tribunals just have to look at the facts and merits of each case. Neither the regulations nor the DTI guide provide a clear definition of what would constitute a genuine need for a fixed term.

However, this might include specialist short-term work; seasonal or project work; a temporary absence to cover maternity leave or sickness absence; work that is externally funded by a single source for a fixed period of time.

 

What should employees do after 10 July 2006?

Employees who have been employed on successive fixed term contracts for four years or more after 10 July 2006 have the right to request a written statement from their employer confirming that they are now permanent (regulation nine).

The employer, within 21 days of receiving the request, has to provide either a written statement confirming the permanent status or give reasons why they are refusing the request.

The employer will have to state "objective grounds for the employee under a fixed term" in order to justify not making the employee permanent. This statement is admissible in a court or tribunal.

If the employee is not satisfied with their employer's written reasons, they can then make an application to a tribunal. However, they must make the request prior to the tribunal application and must still be employed by that employer.

It is important to submit the written request and application to the tribunal before the fixed term contract period comes to an end. And remember that from 1 October 2005 all applications to a tribunal must be made on form ET1 (available from the ETS website www.ets.gov.uk, job centres or the tribunal offices). No other version is acceptable.

The burden of proof lies with the employer to show that there is a genuine reason why the contract has to be fixed term.

 

Has there been any case law?

There has been very little case law to test the rights of fixed term employees since the regulations came into force. However, in September 2005 the South London employment tribunal ruled in favour of four education advisors who brought a claim against their employer, the Department for Education and Skills (DfES).

The tribunal ruled that the four fixed term workers should be awarded redundancy packages if they are made redundant prior to the renewal of their fixed term packages in March 2006.

In comparing their contract terms to those of permanent employees, the tribunal said that the fixed term workers were disadvantaged when it came to redundancy, as they did not benefit from the Civil Service Compensation Scheme.

 

Conclusion

It is generally accepted that fixed term contracts promote a flexible labour market and can be beneficial to both employer and employee. For example, there may be employees who enjoy the flexibility of not working on a permanent basis and have other obligations. Similarly employers have seasonal and project based work that is better staffed by using fixed term employees.

The regulations are in place to prevent the abuse of fixed term contracts, where the reality is that the employee should have all the benefits and security of a permanent contract.

It is likely that there will be an increase of tribunal claims taking advantage of the protection of these regulations from July 2006.

Employers will then have to reexamine the indiscriminate use of fixed term contracts that has clearly disadvantaged employees in the past.